KIGALI - The Minister of Finance James Musoni has said restructuring of micro finance sector where many people have lost large sums of money is under way.
Musoni disclosed on Monday that the government intends to reform operations on small unsecured loans made to people at high interest rates yet most have no assets to guarantee repayment.
This comes one year after the National Bank of Rwanda (BNR) intervened on the unrelenting financial deficit within micro finance institutions.
The minister said the sector needs to be more tightly regulated to accomplish its mission, though there are concerns that the country lacks the expertise to monitor it adequately.
“If one believes in the future of Rwanda, then one has to believe in stable financial and economic empowerment of this section of society,” Musoni said.
Banks face mounting political pressure to lend to poorer Rwandans, partly to safeguard them from loan sharks, and many lenders are attracted to the high yields on offer.
Musoni promised the government intervention with mechanisms that will enable lenders charge low interests in order to curb loan sharks.
“We intend to create a micro finance lending environment where lenders will secure cheap money from banks. But this will only be applicable to fully registered competent micro finance institutions,” he added. Musoni assured that the issue of many people lacking of assets to serve as loan guarantee would soon end since land would be considered as collateral to access loans.
He said the Business Development Service (BDS) branch of the Private Sector Federation (PSF) would help borrowers design appropriate projects to secure soft loans.
“Through PSF initiative of having nationwide BDS centres for capacity building of people, we expect positive results in terms of project design” he added.